tv Nightly Business Report PBS August 31, 2010 6:30pm-7:00pm EDT
report" with susie gharib and tom hudson. >> worst slump in september? >> the markets are extremely thin and not very liquid. ever since the flash crash the public has been in a boycott mode. we're not seeing a lot of retrail trade. >> it's historically the worst month in the market. will tomorrow start another september to remember? you're watching nightly business report for tuesday august 31s august 31st. this is "nightly business report" with susie gharib and tom hudson. "business nightly report" is made possible by:
this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> tom: good evening. investors said good-bye and good riddance to august. susie, worries about the economy weighed on investors all month. >> susie: tom, the major stock
averages posted their worst august in nearly a decade. the dow lost about 4.3%, the s&p 500 fell 4.7%, and the nasdaq tumbled the most, 6.2%. >> tom: so how do things look for stocks in september? if history is any guide, suzanne pratt reports, the downbeat days could continue. >> reporter: for so many americans, september is associated with happy images, like the start of school and perhaps new friendships. for wall street, however, september is just plain spooky. that's because, historically, september is the cruelest of all 12 months for the stock market. n.y.s.e. trader art cashin says, for equity investors, this year is likely to be no different. >> i think there's a great deal of uncertainty out there. there's political uncertainty, there's economic uncertainty. i think some of those problems in europe may begin to resurface again. so there's a lot of risk
factors. >> reporter: others say september's fate rests mostly on the health of the economy, and in particular, corporate profits. right now, third quarter earnings are expected to be strong, up 25% over the same period last year. but strategist jim awad says he'll be watching pre-announcements from corporate america, often released in mid- to late-september. >> more importantly than the macro numbers, which tend to be rear-view looking, you want to look at what companies are saying real time about what they are experiencing in business, in business as we work our way through september. >> reporter: s&p strategist sam stovall predicts this september could be a rough one for stocks, because the market is facing so many headwinds. >> while we do have attractive valuations on a longer term basis, i think because of concerns about the economic direction, because of concerns about what the treasury yields are telling us, that i think that september might be true to form. >> reporter: as to why september
historically is so grim for stocks, experts have a few theories. some say investors refocus on their portfolios after summer vacation. others speculate many americans sell stocks in the fall to pay hefty tuition bills. suzanne pratt, "nightly business report," new york. >> susie: here are the stories in tonight's nbr newswheel. a mixed close on the last trading day of the month. the dow added five points, the nasdaq lost six, and the s&p 500 edged up a fraction. volume climbed a bit from yesterday's pace-- 1.4 billion shares on the big board and 2.1 billion on the nasdaq. minutes from the fed's latest policy meeting show some members think the central bank should provide more support if the economy weakens further. fed officials eventually agreed to reinvest the proceeds from their huge mortgage bond portfolio into treasuries. single family homes in major cities saw a modest price
increase in june. the s&p/case shiller home price index rose 1% from may. but economists warn the bounce was likely due to the final days of the home buyer tax credit. they see prices falling in coming months. despite that gloomy prediction, a key measure of morale is creeping up. the conference board's consumer confidence index rose a bit to 53.5 this month. a reading of 90 indicates a healthy economy, so overall, most americans still feel apprehensive about things. still ahead, the outlook for the airline industry. will carriers continue to fly high this fall? >> tom: a mixed report today on the state of u.s. banking. the industry posted its highest earnings report in almost three years, according to the f.d.i.c. banks made more than $21.5 billion in the second quarter of this year. that's nearly five times more than they earned a year earlier. despite the big profits, there
are still signs of trouble. f.d.i.c. chairman sheila bair expects more banks to shut their doors this year. 118 banks have failed so far, and the number of troubled. institutions on the f.d.i.c.'s problem list jumped from 775 to 829 in the second quarter. many of those are small community banks. >> susie: but a better reading on u.s. farms. the agriculture department predicts exports will jump 5% this year to $113 billion. the trend is due, in part, to u.s. farmers selling to booming emerging markets. but there are problems closer to home. we now know two iowa egg farms linked to a salmonella outbreak didn't follow their own safety plans, letting rats and other animals inside hen houses. washington bureau chief darren gersh talked with agriculture secretary tom vilsack this afternoon about farming's outlook and safety. darren began by asking if u.s.d.a. agents were in a position to spot signs of
trouble at those egg farms. >> well there is a opportunity for u.s.d. officials to take a look at the farms. they're not only part of the grading but the industry from time to time asks us to look at facilities to protect the market, so to speak. but our responsibility sort of stops there. this is an fda issue. they're dealing with it, i think, appropriate ly. >> one question food safety folks rays is whether the u.s.d.a. inspects saw anything and shared the information. is that information sharing going on? >> we are working very hard as a result of food safety working group to develop a cohesive collaborative effort with the fda. when i came into this office i wouldn't say there was much information sharing taking place. there is much more of that. we have a information command system that let's us know better and more timely information what fda nows and we know.
>> from the food safety side critics say usda has encouraged farms to get bigger and leverage up to reduce costs. are we seeing that maybe too big can create food safety problems? >> you know, it's interesting. if you look at what has happened in the last egg census there was over a hundred thousand new operations in the category of less than ten thousand dollars in sale in rural america. with the know your farmer know your food effort there a link of farmers to pharblgts, expansion of farmer markets, community supportive to educate schools of what is growen and raised in their areas for local markets in addition to export markets. at the same time you saw fewer large scale operations in the
egg census. we lost over a thousand farmers. that continues. >> you don't think big equals less safe. >> i don't think it's a matter of big. i think it's a matter of attention and understanding that food safety is about preserving not just the physical health of those who consume products but also protecting the market. >> let's talk about the market. farmers are doing pretty well right now. is that because you see export markets overseas take off? we hear the middle class all over the world wants to eat more, that's good for american farmers. >> it's a combination of several things. first american agriculture is the most productive in the world. farmers went through a lot of debt in the 80s and are aware of debt loads. they were in a better position with the recession. at the same time we're expanding markets.
expanding foreign markets and creating local markets. whether it's farmer markets or selling more pork to china it helps the bottom line. >> are you saying the recession is over for u.s. agriculture. >> i'm saying there is positive signs when you make the acts we have and link that to productivity, embracing the situation you have better jobs, higher incomes for farm families. this isn't just about the farm family but the rural economy. we saw a farm increase of 4.3 percent. we saw a farm family increase of 5.8. that's higher than the over all national economy. >> is this a sign of consumers paying more at the grocery store. >> no. from a farmers perspective their
share of the retail dollar is shrinking overtime. the fact that farmers are doing well doesn't translate to higher food costs. they're more productive. they have figured out less inputs, how to increase productivity, and they keep an eye on the debt load and haven't over extended themselves. it's a good lesson for the rest of the country. i'm excited about the opportunity this presents for the rural economy which is long overdue. >> thank you very much for your time tom.
>> tom: more merger rumors today along with a small improvement in consumer confidence held sellers in check. saks is the latest to be the target of buyout rumors. a british newspaper reports u.s. and u.k. private equity investors are looking at the luxury department store. that news sent saks shares rocketing higher, up almost 20%. according to "the daily mail" newspaper, investors are considering an $11 per share cash bid. that would be a premium even after today's rally. saks stock was at a six-month low earlier this week.
dean foods was also the target of takeover talk. this persistent rumor involves french dairy giant danone. there was no comment from dean, but it was the second best performing stock in the s&p 500. in february and in may, the company issued earnings warnings, leading to stiff sell-offs. the stock rallied better than 4% today. one of the biggest power producers will be making more power from wind. exelon will more than double its power generation from wind with a new deal. it's paying $900 million for john deere's renewable energy unit. it's getting 36 wind generation projects in eight states, with most of it already generating electricity. the deal doesn't change where exelon gets most of its power, though. it is the biggest nuclear power plant owner in the country. morningstar senior analyst travis miller says the return on exelon's purchase depends on future greenhouse gas regulations. >> if we do come into a world
where we have emissions restrictions, and we have possibly carbon caps and we have some kind of price for these emissions that are coming out of fossil fuel generation, then this investment could be one that pays off better than any of their investments they've made in the last few years. >> tom: over the past year, exelon is among the worst performing dow utility index components, down 19%. a warning from monsanto today-- earnings will be at the low end of its forecast. it's share price reflected the disappointment, dropping almost 6% to its lowest price since mid-july. this is a 30-day chart. on this one-year chart, the stock has been in a down trend for some time. the low in june came after it reported a drop in sales and profits due to discounts for its herbicides to competition. the latest trading in gold and oil highlight the market's fear over the direction of the economy. gold jumped $11 today, closing above $1,250 an ounce, its highest price since july 1. as the economic data has
weakened lately, investors have taken protection in gold. oil, meantime, continues dropping. petroleum supplies are at their highest levels in almost 27 years, and with a slowing economy possibly hurting demand, prices have fallen. there's just one more month left in the third quarter, and so far this quarter, telecom has been the winning sector. so far this quarter, the telecom services sector is up more than 10%, far out performing the s&p 500 index, which is up less than 2%. the sector has fared much more defense in this latest sell-off. since the quarter's high point on august 9, all ten of the s&p sectors are down, but less so for telecom, down 0.5%. the index has shed 7%. and that's tonight's "market focus."
>> tonight's word on the street is retail. jeanine poggi reports for the street.com and joins us. welcome to nightly business report. >> >> thank you for having me. >> there are two broadly diversified retail exchange stocks. how diversified are they. >> two of them. they're pretty diversified. i would say the spider retail is more diversified stretching across the sector withholdings
from tiffany and nordstrom to amazon and netflix. it's very equally weighed. >> the ticker simple is xrt. it has a broad basket of stocks, 65 in all. year to date up just under 1%. when we look at the stocks it holds the biggest weighting is less than 3% of over all. does this make it more aggressive or defensive? >> this a more aggressive etf. it's ac equally weighed. they can have a bigger sway than other etfs. >> the ticker is rth. compared to it's relative it's 18 stocks big. year to date down 7 percent plus. less diversified. 20% is in wal-mart.
better than 10% each in home depot and amazon. is this more of a consumer staple retail. >> absolutely. this is for someone who doesn't feel the consumer will rebound. it's someone looking for retail stocks in their portfolio but not as aggressive or looking for a recovery in the near future. >> speaking of the future we're on the cusp, ending the back to school and fourth quarter, how is the out look. >> for me back to school hasn't started yet. we have august same store sales coming out thursday. it doesn't seem like shoppers have hit the stores yet. if this is any indication of the fourth quarter and holiday season i would be a bit worried. >> about what the argument of pent up demand and when the holiday comes you have to spend. >> we talk about things being
shift back. easter shift in april. now consumers shifting in september and october for purchasing. i think it comes to a point where things don't shift they just go away. >> any disclosures with the etf? >> no stocks or etf. >> read en gene's article at street.com and you will find a link from our website at well. jeanine poggi. >> susie: federal safety regulators have opened a safety investigation into the popular 2011 hyundai sonata sedan. the national highway traffic safety administration says more than 16,000 sonatas could have problems with the steering shaft. it's hyundai's best selling car in america. regulators are also examining a report that a bolt in the steering system can become loose. the vehicles involved in the investigation were manufactured during the same month at hyundai's factory in alabama. each car had driven fewer than 600 miles at the time of the alleged incidents. >> tom: this weekend
unofficially marks the end of the summer travel season for the airlines. and many will be counting their cash. july marked the seventh straight month the industry racked up higher revenues. but as diane eastabrook reports, the industry is now flying into a more uncertain season. >> reporter: the u.s. airline industry has climbed out of one of the deepest economic holes in its history. last year, revenues dropped nearly 17%. but in the second quarter of this year, they rebounded in double digits for all of the legacy carriers. experts say capacity cuts that airlines made over the last couple of years eliminated many cheap seats, and that put a floor under fares. another factor-- corporate america has been letting more executives fly business class. a positive sign noted by scott gibson, who follows the airline industry for the consulting firm s.h.&e. >> what we have seen is a loosening from that draconian policy, particularly in a world where wall street was starting to say, "i'm not paying these people the bonus levels that i
was," and that is really a year- ago type thing. they would relax some of the travel rules a little bit. >> reporter: still, the next few months could be turbulent for the airline industry. the fall is typically a slow season for the airlines, and this year, they face the possibility of a double-dip recession. analysts say, if reservations tank, it could be hard for airlines to cut capacity even more, because most of the so-called "low hanging fruit" has already been picked. what they might do is cut the number of trips they make daily to some destinations. despite the uncertainty, fitch airline analyst william warlick says the industry is in much better shape now than it was going into the recession two years ago. >> generally, cash balances are strong across most of the large carriers, and as a result of the success that they had tapping the debt markets in the second half of 2009-- after the credit markets thawed-- liquidity is much, much stronger, and puts most of the carriers, even those that are in a more difficult operating position, in a place
where they can fund their future obligations comfortably. >> reporter: since most passengers, especially business customers, tend to make reservations closer to the time they fly, it's hard to predict how the remainder of the year is shaping up for airlines. air travel is dictated by the overall economy, so if jobless rates climb and housing sales slump, many consumers may opt to stay grounded. diane eastabrook, "nightly business report," chicago. >> tom: here's what we're watching for tomorrow: the financial crisis inquiry commission kicks off a two-day hearing into uncle sam's response to the economic meltdown. also tomorrow, payroll processing firm a.d.p. releases its august employment numbers. and the nation's big auto makers check in with august sales results. we'll see whose showrooms are zooming and whose are stuck in neutral. >> susie: manufacturing giant 3m wants to know where you are, so it's paying $230 million for an israeli firm with technology that tracks people.
attenti holdings uses global positioning and radio frequency to keep tabs on people in all kinds of places, like nursing homes or offenders out on probation. this is 3m's second big deal in two days-- it announced plans yesterday to buy cogent, which makes systems that read finger and palm prints. >> tom: more trouble tonight for mark hurd, the ousted former c.e.o. of hewlett packard. today, he was not nominated to stay on as a board member of news corp. so, hurd's term as a director of the media giant now runs out october 15. hurd left h-p at the beginning of the month in a cloud of controversy over falsified expense reports. uóuwuuuuuu
>> tom: finally tonight, it's an american staple-- peanut butter and jelly sandwiches. so how about a sandwich with peanut butter, soy sauce, serrano peppers, coconut and mint leaves? or one with peanut butter, honey, applesauce and bacon? or peanut butter, strawberries, and basil? those three combos are among the ten winning p.b. recipes in a contest held by the southern peanut growers association. the ten creative chefs won a year's supply of, of course, peanut butter. susie, a newsroom favorite was
one with peanut butter, chocolate spread, and marshmallow cream-- yum! >> well, call me boring but i like the peanut butter and jelly, it's a classic. i don't know about marshmallows. >> you will have me with >> susie: that's "nightly business report" for tuesday, august 31. i'm susie gharib. good night, everyone, and good night to you, too, tom. >> tom: good night, susie. i'm tom hudson. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: